What The Cool Kids of China Are Wearing

Yetang Sells Self-Expression to Chinese Youth

There is a segment of the apparel business that is large but almost impossible to define. It is bigger than any one brand, and it is stylistically diffuse – yet somehow coherent. It encompasses t-shirts depicting kissing robots, necklaces with oversized plastic strawberry pendants, socks in mildly clashing patterns, and hempen trousers that are just baggy enough to evoke a surfer or a yogi.

Yan Zhang, cofounder and CEO of Yetang.com

The look could be called Funky Lite. It’s edgy. It’s indie. But it’s not so transgressive that teenagers and twentysomethings – the wearers of this style – would be stared at when wearing it at a party. It is studentwear for students who strive to look cool on a budget, and it is weekendwear for young office workers who reclaim some individuality on Saturdays. Price defines the category more than a particular aesthetic. These statement pieces are affordable. That is why millions of people are wearing them – whether they come from H&M or a hipster boutique in Los Angeles – around the world.

“It’s affordable statement clothes,” says Yan Zhang, cofounder and CEO of Yetang.com, a Beijing-based e-commerce company that sells this style – and this style only – to young Chinese people.

Yetang has staked out a section of Chinese e-commerce that may seem obscure compared to the territory claimed by Alibaba. Yetang’s entry point is calculated, however, to take advantage of several trends in Chinese consumer culture today. It is a bet on the tastes and modest disposable income levels of young urban Chinese people. It capitalizes on the increasing acceptance of online shopping and online payments in China. And by focusing on modest production volumes from independent designers, Yetang leverages shifts in China’s apparel manufacturing capacity.

Yan and his cofounder, Natasia Guo, launched Yetang in 2013. The idea originated from Natasia’s blog about independent design in China. The designers she interviewed were not indie high-fashion icons like Vivienne Westwood. They were artsy people, some of whom had gone to design school. They made affordable, fun, sometimes provocative clothing and accessories. According to Yan, many of them designed clothes as a glorified hobby, and very few of these independent brands had shops. The market opening was clear.

Like Etsy did in the US, Yetang identified a retail marketplace that can only exist at scale in the digital economy, because the thing that defines the market is also what keeps it fragmented – until, that is, an e-commerce platform is built to organize and centralize thousands of dispersed, low-volume goods.

Yetang

“The macro story of e-commerce is unquestioned: it’s a big business and it will get bigger,” says Yan, speaking from Yetang’s new offices on the Third Ring Road in Beijing. “But when you sell on the internet and everything is searchable, the only way you can compete is on price and speed of delivery. Anything you search for that is standardized – like a Dell computer or an iPhone – you just compare who has the cheapest.” This is where Alibaba and its sister company, Taobao, dominate Chinese e-commerce with Amazonian hegemony.

“But there’s a whole area of e-commerce that these companies are not good at,” he adds. “They’re not good a finding things you can’t search for, which are things like unusual branded and non-branded apparel, pieces of home décor, accessories. These are things you don’t necessarily know about, things that people need to see to know if they like it or not. If you really like it, you can probably sacrifice three or four days’ delivery time to receive it. These things are more about ‘emotional commerce’ than e-commerce.”

Elvis Presley cameo earrings, in other words, are different from Colgate toothpaste – a commoditized product that creates a low emotional reaction in the buyer, who seeks a low price and quick delivery.

“Selling products from independent designers in China seemed like a good idea,” says Yan, who wanted to be an ‘emotional commerce’ merchant. Etsy, the wildly popular e-commerce platform for handcrafted goods, pioneered the independent-design niche in the US. Listing Yetang as one of the “ten most innovative companies in style” in 2015, FastCompany magazine called it “the Etsy of China.”

“We’ve been called the Etsy of China, but a much better comparison would be Urban Outfitters, which is this multibrand store that caters to people who want that little bit of the countercultural thing,” Yan says. “We’re not like Etsy in terms of believing there is a special handicrafts movement in our market, because there isn’t one in China. But there are lots of small and medium-sized accessories brands here that find it difficult to do business other than on specialty platforms. And we [like Etsy] became a platform for all of those brands.”

Yetang has grown quickly in the past year. The site received 2.2 million visitors in April compared to “around 400,000” in April 2014. While the company is not profitable, revenues doubled over the past five months, Yan says. The site sells 30,000 separate items from 1,100 brands. “People keep telling us we don’t have enough stuff,” Yan says.

As publications like The Economist mention, China’s 30-year economic revolution has created a consumer culture of enormous value to Chinese and international brands. The flash of Prada, Louis Vuitton, and other luxury retail across China’s eastern cities represents this phenomenon. Yetang, however, avoids the luxury end of the market, which serves a miniscule proportion of a poor-per-capita country striving to reach middle class living standards. The site targets styles and price points that it believes are more attuned to the modest changes in young consumers’ disposable income and appetite for expression.

Yetang

“China is in line with international attitudes in that for a lot of people in the post-1990s generation shopping is a much more individualistic,” Yan says. “It’s about finding things that are unique, different, expressive, super-local. They splurge a lot more than the post-1980s generation did. At the same time they don’t have a lot of money to spend on clothing. Maybe they have 800 to 1,000 yuan monthly, and they have to subtract a portion of that to pay for their new iPhone. We’ve done consumer studies that show that they don’t have a lot of money, but they do spend money on things that interest them. Identity building is very important to them.”

So what exactly interests the “average” 21-year-old Chinese urban consumer? Yetang is amassing a growing pile of data on the question. The answer is: items that differentiate them from their peers – but safely so.

Yetang classifies its merchandize according to male and female consumer profiles marked 1-2-3-4 on a “continuum of confidence.” Every designer on the site is pegged as selling to one or more of these profiles. Profile One, for example, is an immature buyer without much knowledge of or desire for statements. Indeed the Profile One consumer might be too timid to buy clothing from Yetang.com, settling for more discreet accessories like sneakers or salt-and-pepper shakers. “Female One has just discovered self expression as a mode of buying things,” Yan says.

Female Two, he adds, is “more comfortable standing out, even if she is not doing it in a particularly adult, confident way. These are people who might buy colorful, aggressively Hawaii-like styles, maybe a giant sweatshirt with a big piece of red fruit on it, and march down the street wearing all one color. They’re not going for a sexy look, but it’s individualistic.”

Female Three is more interested in tighter-fitting clothes and international brands. Their tastes can verge from “grad school chic” to “rock and roll”. The apex Female 4 is like Female 3, but the look is more intense and often androgynous.

Profile One is Yetang’s biggest buyer – for the moment.

Yetang

“We’re pulling a lot of people who are just realizing that self- expression is a choice when buying things. And we’re talking about ‘self expression’ from an extremely low threshold,” says Yan, who was raised in Nanjing, educated at Princeton University, and lived in New York before returning to China.

“We’re dealing with China, and China is not yet at that state of niche-based, subcultural obsessions that you see in Japanese style. Individual expression could be something as simple as designer sneakers. That’s an entry point for a lot of young Chinese consumers seeking to express themselves, because they have to wear school uniforms. Gym class is the only time a 16 or 17 year old can stand out, and that’s why they would shell out $100 for sneakers if they could.”

Demand for Yetang’s products rises for many of the same reasons driving the demographic’s demand for more daring food, more adventurous travel, and more risque comments on social media. The company has hidden advantages on the supply side as well. Better than Japan, the US, Britain or France, China is equipped to produce fast fashion from local independent designers. The world’s apparel factories are all around them.

“China has the biggest factory capacity in the world for clothes,” Yan says. “These factories pump out large shipments for international brands. But since 2008 growth has slowed in the manufacture of apparel for export. There’s spare capacity. A lot of the big factories used to be organized to churn out 5,000 pieces per SKU, and they have been retooled around smaller, more specialized supply chain systems that could make, say, 100 SKUs. That accommodates fast fashion in a big way.”

For the small Chinese designer in 2015, production costs are lower because factories can turn around small orders quickly and ship them locally. Retailing costs are also lower, because e-commerce platforms like Yetang obviate the need for shops on the street.

“A lot of people who did not have the capital to start their own brands were suddenly saying, ‘I only need 200,000 yuan [$32,000] to start my own brand.’ It was like everything in the whole apparel supply chain was falling in to place to let these people make a business out of clothes for a relatively small amount of startup capital.”

This helps explain how Yetang, less than two years old, has amassed over 1,000 independent designers selling a style that is not much older than the company. “A lot of our designers do okay revenue-wise, maybe making 100,000 yuan before hitting a seasonal bottleneck and shutting down for five months. It’s somewhere between a hobby business and a professional business.”

“But all of them have this dream of working independently. But at Yetang we’re all about: how can we help this community of designers succeed as independent businesses and not have to work for ‘the man?’”

Yetang takes a 30 per cent commission on sales. The designers receive a digital shopfront and digital footfall.

For now, the indie-ness of Yetang’s community of designers gives it a competitive advantage in Chinese e-commerce. The much larger Taobao – like Amazon or Ebay – is suited to well-organized, high-volume sellers of commoditized products. It is not so good at accommodating small-volume designs made by people who are artists more than marketers. A behemoth like Taobao has neither the financial incentive nor the indie credibility to create a community and attach it to a sales apparatus in the way Yetang has done with its designers.

Yetang

The focus on independents, however, may also impede Yetang’s expansion. And expansion is on the company’s mind after a $5 million Series A fundraising round completed in December 2014. Its Chinese designers do not make all the items that a shopper may want when approaching Yetang as a full-service retail portal. Denim shirts are one example, Yan says, of a product category that the company has to source outside its network of Chinese designers. A large portion of its shoes, watches, and bags are international brands.

As it expands Yetang must concentrate on the integrity of its own brand, Yan says. “Our brand is especially important now that we are moving to widen the merchandize we are selling. It all depends on doing what we set out to do, which is to be an exclusive place for unique, new, spunky, cool, generation-appropriate merchandise. It’s not easy.”

The array of brands and products require constant sourcing and curation as the range expands. Natasia, Yan’s cofounder, handles the merchandizing side of the business. She decides what is new, spunky, cool, and affordable in a genre of product that has no definition in East or West. Among the tens of thousands of products offered in April are a thermos in the shape of a green spotted mushroom (17 yuan), a summer dress covered in a pattern of Aga stoves and crockery cupboards (780 yuan), and a men’s t-shirt that says in English: Under Class Hero – I am Famous But Nobody Knows (138 yuan).